CJEU Ruling in Nintendo v PC Box case

The Court of Justice of the European Union (“CJEU”) last week handed down its decision in Case C-355/12 (Nintendo v PC Box). ISFE is pleased that the ruling of the CJEU is generally consistent with the opinion of Advocate General Sharpston and with Nintendo’s observations to the questions referred by the Milan Court, which were fully supported by ISFE.

The CJEU’s interpretation of the Copyright Directive appears to be in line with the international obligations of the European Union and its Member States under the WIPO Copyright Treaty, and furthermore supports those national Courts in Belgium, France, Germany, the Netherlands, Spain and the UK that have already considered and applied the same provisions of EU law consistently resulting in positive decisions against the sellers of circumvention devices. ISFE is pleased that the CJEU has now confirmed a robust level of protection for technological protection measures (“TPMs”) in line with existing legal norms.

Since Nintendo only ever utilises TPMs which are both necessary and proportionate to prevent widespread piracy of its intellectual property, and since the preponderant purpose of the circumvention devices marketed by PC Box is to enable piracy of legitimate video games, ISFE is confident that the application of the test of proportionality set out by the CJEU will enable the Milan Court to determine that the sale of circumvention devices is unlawful.

The outcome of this case was crucial for the video game industry as it uses a wide variety of TPMs to not only protect its products from piracy, but to ensure the development of new means of delivery, so creating more product development, growth and jobs. TPMs are used for a range of purposes that are distinctly beneficial to consumers, including the protection of minors. TPMs also underpin the wide variety of cross-border digital business models that are the foundation of the video game industry which is a prime exponent and driver of the EU’s digital single market.

Piracy constitutes a major threat to the game industry and costs it hundreds of millions of euros in lost sales every year. Online piracy causes widespread economic damage to European game developers, publishers, distributors and retailers. It also hurts national tax revenues and undermines the prospects for economic growth, employment and technological innovation.

It can take two to three years and tens of millions of pounds to bring a major game title to market. Only a small percentage of these games achieves profitability, and the active sales cycle of a new game release is often only a few months long. The industry, therefore, incurs particular damage due to the widespread availability of devices and software designed to circumvent the TPMs that the industry uses to protect its games. This affects companies of all sizes, damaging both revenue streams and employment levels right across the industry.

Day-by-day, these circumvention devices further fuel the levels of online piracy because each one functions as a gateway to multiple future infringements and inflicts untold damage on legitimate game sales. The widespread availability of circumvention devices and services significantly contributes to the growth of online piracy, as unauthorised copies of games downloaded from the Internet can only be played on consoles modified by such devices, technologies or services.

The video game industry, therefore, regards the enforcement of effective provisions against the manufacture, distribution and use of circumvention devices (including software) as an essential factor in preventing or limiting the download and sale of pirate games. Ensuring that countries have effective legislation and enforcement regimes that make such circumvention, as well as the manufacture and distribution of circumvention devices, illegal and subject to both criminal and civil remedies, is a very high priority for the industry. Without the ability to deploy TPMs, console piracy would thrive and competition and innovation in the market would be undermined or destroyed.